Bank of Ireland set to raise lending rate for mortgages

DESPITE figures that reveal a rising number of cash- strapped homeowners are falling into arrears, Bank of Ireland has signalled it will raise its lending rate for mortgage holders.

The bank also dismissed suggestions of any blanket industry-wide debt forgiveness solution for those unable to meet their mortgage repayments.

While AIB recently suggested it may offer some form of debt forgiveness to homeowners, banks are reluctant to agree to any policy of debt forgiveness, as it could, they feel, lead to a demand for such treatment from all homeowners.

Figures released by the bank show that, as of the end of June, more than 4.5% of its 145,000 Irish owner-occupier mortgage book was in arrears for more than 90 days. This is up from a level of 3.2% at the same point last year and is an increase of 6,525 mortgages.

The bank also said that it believes mortgage arrears levels will continue to climb into 2012 and it is working with 5,000 customers who see difficulty ahead.

Figures released recently by AIB showed that 4% of its owner-occupier mortgage holders are three months or more behind on their payments, which is up from 3% in December.

KBC have also said arrears on owner-occupier loans have now hit 8.8%, with the bank expecting this figure to rise even further. At Permanent TSB, the number of residential homeowners in arrears is about 6% of the lender’s mortgage book.

Around 100,000 homeowners are either in arrears or have had to restructure their mortgage, according to official figures.

Reacting to the figures yesterday, Bank of Ireland chief executive Richie Boucher said while the bank is keen to work with stricken mortgage customers on a case-by-case basis, the bank had no interest in any blanket solution to debt forgiveness, covering the banking sector as a whole.

Finance Minister Michael Noonan has said the Government is planning to examine “a number of proposals” in relation to helping homeowners in difficulty.
A working group is to be established, made up of officials from the Department of Finance, the Central Bank and other government departments, to come up with some solutions.

Rachel Doyle, director with the Professional Insurance Brokers Association, advised mortgage holders on variable rates to consider fixing for periods of five years or longer, provided they get one of the better value rates. She said, despite last week’s ECB decision to leave its interest rate unchanged at 1.5%, rates are in an upward cycle.

Meanwhile, shares continued to fall yesterday, with Irish stocks losing 2.3%. In Britain, stocks also fell as the cost of insuring French debt rose to a record level.

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